ARTICLES, DISPUTE RESOLUTION, IDEAS

Electricity and its Discontents

Nikola Tesla, the inventor of modern electricity

 
‘The price of monopoly is upon every occasion the highest which can be got…The one upon every occasion the highest which can be squeezed out of the buyers, or which, it is supposed, they will consent to give…”
 
Adam Smith, The Wealth of Nations (1776)

 

Tenaga Nasional Berhad or TNB, once called National Electricity Board (NEB) is the country’s biggest and sole supplier of electricity. 

As a government-gifted monopoly backed by parliament-made laws protective of its economic interests, TNB has over the years grown profitable, powerful and technologically advanced. Recently the public’s acceptance of TNB as a necessary behemoth has turned into open hostility and even disdain as more consumers have come out accusing TNB of overcharging and high-handedness.

Consumers who find their home or factory power supplies cut and court actions taken against them by TNB for stealing electricity through meter tampering are especially unhappy and aggrieved. 

These consumers are slapped with debilitating (and sometimes multiple) court summonses by TNB. The claims for such “loss of revenue” are usually punitive and sometimes for sums of money far exceeding what most consumers are capable of benefitting from their alleged transgression.

A consumer when sued by TNB for meter tampering is like a soccer team that enters a match with a pre-existing 1-0 score at kick-off in favour of the rival.

Much of the apparent unfairness is due to the way the courts have interpreted the abstruse provisions of the Electricity Supply Act 1990 – a statute specially enacted for the benefit of TNB’s privatization.

Recently the judicial tide seems to be turning in favor of consumer rights over the unrestrained free hands of corporate monopoly.

In a first ever decision, the Court of Appeal in Putrajaya stunningly slashed TNB’s claim against a customer for tampering with the power meters in its plastic making factory in Johor Bahru.***

TNB’s claim for RM1.1 million of loss revenue from tampering was dramatically reduced by the court to just RM28,000 – a reduction of over 97% !

The appeal court’s panel of three learned judges unanimously sent a strong signal that TNB can no longer simply claim any unreasonably huge amount it wants from the consumer based on the previous logic of the courts that a thief who has stolen has no right to question but, as punishment, must merely accept whatever amount the victim has estimated to be his loss.

Now the Court of Appeal says TNB to be sure can still claim the lost income from meter tampering by using an estimate but this estimate must not only be fair and reasonable. It must also be mathematically calculable and capable of standing in the face of the facts.

Lim Yew Yi , LLB (Malaya), Advocate and Solicitor

*** The case of Tan Kwee Siang v Tenaga Nasional Berhad, decision of the Court of Appeal was delivered on 23 May 2019. Kerk & Partners acted for the appellant Tan Kwee Siang. The case is at the time of this article unreported

Uncategorized

Selamat Arrivederci

Massacre of the Innocents by Peter Paul Rubens

Malaysia and the Statute of Rome

Malaysia has just announced it will pull out of the Rome Statute.


The Rome Statute (not to be confused with the Treaty of Rome that gave birth to the European Union) is an international treaty that aims to punish powerful individuals who can get away with killing and murder on a country scale because the laws of the land they are in will not or cannot bring them to justice.


Fresh with memories of two of the largest attrocities since World War II that had taken place in Bosnia (1992) and Rwanda (1994), the nations of the world met in Rome in 1998 to hammer out a document that in 2002 set up the International Criminal Court (ICC) in the Hague, the stately and sedate town in Holland that is home to the Dutch parliament and also the International Court of Justice.


The ICC has the power to investigate, charge and put on trial powerful people who commit terrible and large scale killings of groups of human beings in cases of genocide, war crimes and other international crimes of aggression.


Malaysia now says it does not want to be part of ICC although it earlier said it would join.


Bowing again to popular sentiments Malaysia has back pedalled and gone against the global current like it did a few months ago by reneging on its promise to stamp out racial discrimination and abolish the death penalty.


Mass ignorance, misleading academics and mischievous politicians have won the day once again in Malaysia.

IDEAS, Uncategorized

Finding fairness

Philanthrophy on Petaling Street on Chinese New Year’s Eve. Copyright Kerk Boon Leng 2017  

Measured by gini index, Malaysia is now Asia’s most unequal society ( more than even famously unfair countries like India and China). 

The latest model BMWs you spotted in BSC, non-halal 12-course dinners and the lavish lifestyles of denizens of Damansara are an alien world apart from the majority of citizens in the Klang Valley : families of despatch riders, supermarket cashiers and lowly paid government servants returning home to their squalid flats with many large mouths to feed. 

Ever since moving into KL’s urban space in increasing numbers in the 1960s and 1970s the Malays (unlike the crowd-loving Chinese and Indians) have never felt totally at home in the city. 

Cut off from the security and support of their kins and kinds in the Kampongs the Malays suffer from what the French sociologists termed Anomie and what Germans called Angst. 

Poverty, cultural disconnect, urban tension and the mental walls imposed by a Government-sponsored religion are potent ingredients for an incendiary social cocktail.

Understanding their pain and our compassion and kindness to one another is what our country needs now.

Caring for our poor, dispossessed and hungry no matter what race they are or what God they believe in is what truly matters. This is what will hopefully one day make Malaysia fair, multicultural and more equal.

Lately Malaysians have been spiraling into a vicious quarrel about whether this country should finally sign up to its United Nations obligations under The International Convention on the Elimination of All Forms of Racial Discrimination (ICERD). Bizarrely but not so surprisingly, Malaysia along with North Korea and Myanmar are the only noteworthy nations left in the world that haven’t signed. 

ICERD is just another aspirational announcement by governments around the world to each other on their lofty intentions about vague and vogueish subjects like world peace, stopping climate change and freeing Palestine. These are not things for us common folks to worry about or fight each other for.

Plainly in such times of mass pain, hunger and ignorance, ICERD is absurd.

Kerk Boon Leng

CORPORATE, INTELLECTUAL PROPERTY

How to brew the Golden Tea : Franchising in Malaysia

Oranger Photos

Looking at the lifestyle outlets sprouting up in shops and malls these days gives people the impression that franchising is the easiest way to start a business. With planning, knowledge and of course money, it can be.

Franchising is when a business owner gives you the right to use his brand, product, business system to operate your business in return for payment.

A. The Basic Questions

Prospect

Does the food fad you saw recently in a Taipei night market or latest fashion brand in Milan’s Quad d’Oro fit the tastebuds of Cheras or dress sense of Damansara?

Concept

Franchise is a unique business concept. It is not a buyer-seller relationship but a comprehensive and inter-dependent relationship between you (franchisee) and the owner (franchisor). Are you ready for a relationship?

Documents

The business you are going to run is spelt out in thick and complex legal documents : disclosure document, operation manual, training manual and the franchise agreement. Do you know what you are getting yourself into ?

B. Franchise or Licence?

Protection

Unlike overseas, in Malaysia franchising is a regulated business that is monitored under the Franchise Act. As long as the business is operated using a franchise system, the franchisor must register the franchise before it can be sold to you. If not, any agreement you sign for the franchise is not valid and both parties would be committing an offence under the law.

Documents such as the franchise agreement, disclosure documents and the financial report of the franchise must be submitted to the franchise registry every year. The law also spells out the duties and responsibilities of the franchisor and franchisee owe to each other.

If you choose a licence instead, parties have the freedom to negotiate the terms they wish but are then exposed to the risks of unequal skills, bargaining positions and vagaries of the marketplace.

Transparency

The franchisor is by law required to give you a copy of the franchise agreement and disclosure documents at least ten days before the signing of the franchise agreement.

In licencing, you must rely on information given to you by the Licensor or revealed by company search, CTOS search or due diligence performed by your lawyer.

Flexibility

It is normally hard to negotiate terms of the franchise with the franchisor. The operation manual and terms in the franchise agreement are usually uniform across all franchise outlets.

A license agreement on the other hand is more flexible and can be changed to tailor-suit the licensee.

Control

The franchisor controls how the franchise business is being run via the operation manual and the franchise agreement.

Under sections 26 and 27 of the Franchise Act you must keep the confidential information obtained from the franchise secure and not to operate a business similar to the franchise at least two years from the termination of the franchise agreement.

Duration

The minimum period for a franchise is five years [Section 25 of the Franchise Act]. Depending on the kind of business this period can sometimes be longer.

There is no minimum period for a license. It is entirely up to the parties how short or long they want the license to be.

C. Important terms in a Franchise

All terms in the franchise that you agree with the owner must be set down in writing and signed. The important ones are:

Operation (Management and Training)

This is the heart and soul of the franchise. Understanding the how, what and who of the franchise is not just good for business, it is survival.

Exclusivity

The franchise gives you exclusive rights to a geographic area. No competitor franchisee is allowed to set up shop in your exclusive zone.

Intellectual Properties

As franchisee, you are authorised to use the trademarks, the recipe, copyright materials of the franchise. In some cases, the franchisor will set some limits as to their use.

Cooling off Period

You can still change your mind about going into the franchise within seven (7) days after signing the franchise agreement. By relying on the cooling off period clause you can terminate at this point but you would need to pay all the costs incurred to date.

Fees

This is the price you need to pay for the franchise. The main fees are the royalties and marketing fees.

Third party suppliers

As franchisee you are only allowed to get your goods and services for the business from certain suppliers nominated by the franchisor. You can be in breach of your franchise if you buy your goods or services from parties outside of the franchisor’s list of suppliers.

Renewal

At the end of the franchise period as long as you have complied with all the terms, you are entitled to renew the franchise by giving six months notice in writing to the franchisor.

If the franchisor decides not to renew the franchise he must compensate you either by paying you a reasonable sum or buying back the franchise from you

Termination

A franchise cannot be terminated for the first five years unless both parties agree mutually to cancel or if the cancellation is by court order.

D. Getting Started

Registration

You must register yourself as a franchisee within fourteen days after you signed the franchise agreement (Section 6B of the Franchise Act).

Review

By regularly reviewing the operation of the franchise it will help you implement new operation system and marketing plan more effectively.

Training

As franchisee you must run the business properly according to the operation and training manuals and ensure that all the staff are properly trained.

Communication

It is good practice to keep the franchisor informed about the business with suggestions and feedback. Communication is important in building a good franchise relationship.

Support

In exchange for payment of fee and royalty, the franchise owner is obliged by law to assist you as franchisee in making your franchise business a success.

Andrew Yoon, Barrister-at-Law (Middle Temple)

ARTICLES, PROPERTY, TAXATION

Malaysia’s RPGT 2019: More Pain, Less Gain

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From 1 January 2019 onwards RPGT will have to be paid regardless of how long you have owned your property. Real Property Gains Tax (RPGT) is the share of money you must pay to the government from the profit you make in selling your house.

Previously under Najib Razak RPGT in 2014 was hiked up to the highest rates in its history. This time Malaysia’s first-time populist coalition government has outdone its maligned predecessor. The new government has announced that not only will those high rates increase but RPGT will also now be perpetually payable.

Until 31 December this year if you are the owner of your property for more than five years then you pay zero % RPGT if you are Malaysian and 5% RPGT if you are a company or a foreigner.

Effective  1 January 2019 the rates of RPGT for property sold after five years is 5% for Malaysians and 10% for foreigners.

RPGT rates for property sold within three years and on its fourth and fifth years remain fixed at 30%, 20% and 15% respectively.

There are people who see tax as a great equalizer, that RPGT is a necessary evil to curb greedy speculators who drive up house prices. They feel that RPGT imposed on property sellers and landowners is fair since these wealthy people enjoy more of society’s resources and comfort.  Indeed some form of rich tax is needed to reduce Malaysia’s income gap which is the widest in Asia and one of the worst wealth distributions in the world.

To do this the new government will do well to also look into the following:

  • Exempt all houses that are principal place of residence from RPGT. At present sellers are only given a once in a lifetime exemption. Any owner who can prove that his house has been used as a home should not have to pay RPGT.
  • Make owners of multiple houses and commercial units fork out more for RPGT but be lenient on the small house owner who may be selling his house at a better price to upgrade his family or maybe just to survive inflation.
  • Abolish or reduce the present requirement to retain and send to the government  within 60 days of the sale 3%  (Malaysian) or 7% (foreigner) from the property price as security for RPGT. The deposit in Malaysia is normally 10% of the price so such large retention for RPGT will leave a house seller with no cash after he pays his agent and lawyer. He has to wait 6 months or more to get his money from the sale and up to a year for his RPGT refund from the government. It is discouraging to note that Malaysia holds a world record for using the longest average time to transact a property deal.
  • Allow interest paid for bank loans to be deducted for RPGT. Since RPGT is going to be perpetual and applicable many years after you first bought your property most gain on property will not be real but inflationary.
ARTICLES, IMMIGRATION, MIGRATION

MM2H : SOME UPDATES AND CLARIFICATION

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Malaysia this year is a country excited for change. But judging by the way the country is handling the change it wants to make to immigration especially MM2H, it appears not to know how.

Last month the Malaysian government sent a notice to all MM2H licensed agents to tell them that the usual monthly committee meetings to vet applications and to approve them in batches have stopped. All applications they say will now go straight to the Minister responsible for immigration for his decision.

Unhelpfully the Government did not say how this new procedure will affect the time taken for processing approvals. We can only guess that the new processing time will likely be longer than the 6 months it now takes for approval.

The Government’s notice worded in officialese and clumsily circulated via MM2H Agents Association group chat has caused widespread concern and confusion. The notice has misled many into thinking the MM2H programme has been suspended. It hasn’t.

Applications for MM2H are still being accepted. Actually more applications have been received lately. The increase is fueled partly by rumours that the government will soon raise the bar for MM2H or maybe even disband it altogether.

So for those who are interested, you can and should still apply now for MM2H. It’s just that you need to brace yourself for a longer waiting period.

Kerk Boon Leng